830 CMR: DEPARTMENT OF REVENUE
830 CMR 63.00: TAXATION OF CORPORATIONS
830 CMR 63.00 is amended by adding the following section:
830 CMR 63.39.1: Corporate Nexus

(1) General.

(a) This regulation, 830 CMR 63.39.1, describes the circumstances under which a foreign corporation is subject to the tax jurisdiction of Massachusetts under M.G.L. c. 63, § 39.

(b) This regulation, 830 CMR 63.39.1, is organized as follows:


(1) General
(2) Definitions
(3) General Rule For Evaluating Corporate Tax Jurisdiction
(4) Activities Within the Scope of M.G.L. c. 63, § 39
(5) Exception for Solicitation Activities Protected By P.L. 86‑272
(6) Other Exceptions
(7) Independent Contractors
(8) Corporate Partners
(9) Nexus Determinations
(10) Examples 

(2) Definitions.

Commissioner. The Commissioner of the Massachusetts Department of Revenue or the Commissioner's duly authorized representative.

Corporate Form. A form of organization recognized in Massachusetts as that of a foreign corporation under M.G.L. c. 63, § 30(2), whether or not the entity is described as a corporation by the state under whose laws the entity is organized.

Documentary Evidence, journals, books of account, invoices, expense reports, or other records that are maintained by the taxpayer in the regular course of its business. Generally, an affidavit or other document prepared in anticipation of, or in response to a tax audit, examination, or litigation is not documentary evidence.

Employee. Any person who, under the usual common‑law rules applicable in determining the employer‑employee relationship, has the status of an employee. A person is presumed to be an employee of a foreign corporation, rather than an independent contractor, if the foreign corporation treats that person as an employee for purposes of the payroll taxes imposed by the Federal Insurance Contributions Act.

Foreign Corporation. An entity defined as a foreign corporation under M.G.L. c. 63, § 30(2).

Independent Contractor. An independent contractor as defined below, 830 CMR 63.39.1(7).

Licensed Public Warehouse, any building or part thereof maintained as a business for the public storage of goods, wares, and merchandise by a warehouseman licensed under the provisions of M.G.L. c. 105, provided however that any portion of a warehouse owned or leased by a consignor or consignee of tangible personal property stored in the warehouse is not a licensed public warehouse for purposes of M.G.L. c. 63, § 39.

Missionary sales activity, generating retail demand for the products of a manufacturer or distributor (and indirectly generating wholesale orders for those products) by promoting the products to retailers who typically order the products from a wholesaler or other middleman.

Office, a permanent or temporary location where a corporation makes sales or holds itself out to the public as conducting business. An in‑home office of a corporation's sales representative is generally not an 'office' of the corporation for purposes of this regulation, provided that the representative does not publicly hold himself out as doing business on behalf of the corporation at that location, either by publishing the home address as a corporate business address or through other actions.

Partnership, any entity considered to be a partnership under common law rules, under the provisions of the Uniform Partnership Act, or under the provisions of the Uniform Limited Partnership Act. A corporate trust that is subject to the provisions of M.G.L. c. 62 is not considered to be a partnership for purposes of this regulation, 830 CMR 63.39.1.

Representative. An employee of a corporation, or any person who otherwise acts on behalf of the corporation, provided that an independent contractor as defined in this regulation, 830 CMR 63.39.1(7), is not a representative.

Sample or display area. A temporary location, such as a hotel room or trade show exhibit, where representatives of a foreign corporation exhibit samples, but do not make sales, approve orders for sales, or conduct any of the activities listed in 830 CMR 63.39.1(4)(d).

Samples. Representative samples of the product of a foreign corporation that are used in sales demonstrations or are distributed in limited quantities, without charge, to acquaint existing or prospective customers with the corporation's products. Gemstones or other unique items held for sale by a sales representative are not samples.

(3) General Rule for Evaluating Corporate Tax Jurisdiction. M.G.L. c. 63, § 39, imposes an excise upon all foreign corporations that enjoy, under the protection of the laws of the Commonwealth, the powers, rights, privileges, and immunities derived from the corporate form of existence and operation. The Commissioner will construe M.G.L. c. 63, § 39, as asserting the tax jurisdiction of Massachusetts to the extent permitted by the Constitution and laws of the United States, unless a specific statutory exclusion from taxation exists. In general, a foreign corporation is subject to the tax jurisdiction of Massachusetts under M.G.L. c. 63, § 39, if it engages in any of the activities listed in 830 CMR 63.39.1(4), unless those activities fall within the exceptions described in 830 CMR 63.39.1(5) (relating to P.L. 86‑272) or 830 CMR 63.39.1(6) (other exceptions).

(4) Activities Within the Scope of M.G.L. c. 63, § 39. Except as provided below in 830 CMR 63.39.1(5)‑(6), a foreign corporation must file a return in Massachusetts and pay the associated excise if any one or more of the following apply: 

(a) the corporation is qualified to do business in Massachusetts under M.G.L. c. 181, § 4; 

(b) the corporation actually does business in Massachusetts, whether or not it has qualified to do so. For purposes of M.G.L. c. 63, § 39, "doing business" includes: 

1. the buying, selling or procuring of services or property; 

2. the execution of contracts; 

3. the exercise or enforcement of contract rights; 

4. the maintenance of a place of business; 

5. the employment of labor; 

6. each and every other act, power, right, privilege, or immunity exercised or enjoyed in the Commonwealth as an incident to or by virtue of the powers and privileges acquired through corporate form; 

(c) the corporation exercises or continues its charter within Massachusetts;

(d) the corporation owns or uses any part or all of its capital, plant, or other property in the Commonwealth in a corporate capacity (as opposed to a strictly fiduciary capacity). Without limitation, a corporation owns or uses property in Massachusetts if:  

1. the corporation owns property that is held by another in Massachusetts under a lease, consignment, or other arrangement; 

2. the corporation uses property in Massachusetts that it holds under a lease, license, or other arrangement; 

3. the corporation maintains a stock of goods in Massachusetts (see, however, 830 CMR 63.39.1(6)(c), regarding property stored in a public warehouse). 

(5) Exception for Solicitation Activities Protected By P.L. 86‑272

(a) General; Preemption of State Law. A foreign corporation whose activities fall within those described in G.L. c. 63, § 39 and 830 CMR 63.39.1(4) nevertheless is not subject to Massachusetts taxation if Massachusetts is precluded from exercising its jurisdiction by P.L. 86‑272 (15 U.S.C. §§ 381 et seq.). P.L. 86‑272 currently precludes the imposition of the excise under M.G.L. c. 63, § 39, upon a foreign corporation if the sole activity of the corporation in Massachusetts is the solicitation by the corporation's representatives (in the name of the corporation or in the name of a prospective customer) of orders for the sale of tangible personal property, provided that the orders are sent outside Massachusetts for approval or rejection, and provided that the orders are filled by shipment or delivery by common carrier or contract carrier from a point outside of Massachusetts. Some examples of common solicitation activities are listed in 830 CMR 63.39.1(5)(c), below. 

(b) Scope of P.L. 86‑272. P.L. 86‑272 restricts states' tax jurisdiction with respect to sales solicitation activities only if the taxpayer's activity is limited to solicitation of orders for the sale of tangible personal property. The protection from state net income taxes provided by P.L. 86‑272 does not apply to solicitation activities under the following circumstances: 

1. A combination of solicitation activities and other unprotected activities is not protected by P.L. 86‑272. If a corporation engages both in protected solicitation activities and in any other activity that is not solicitation of orders for the sale of tangible personal property, it may not claim the immunity provided by P.L. 86‑272; 

2. Solicitation of orders for the sale or provision of services is not protected by P.L. 86‑272. A corporation may not claim the immunity provided by P.L. 86‑272 if it sells or provides a mixture of services and tangible personal property to its customers. Typical examples of the sale of a mixture of services and tangible personal property are photographic development, the fabrication of a customer's materials, the installation of equipment, and the provision of architectural or engineering services; 

3. Solicitation of orders for the sale, lease, rental, license, or other disposition of real property or intangibles is not protected by P.L. 86‑272. 

(c) Activities Normally Considered to be Solicitation. The following are examples of activities that ordinarily fall within the scope of "solicitation" under P.L. 86‑272. 

1. Advertising campaigns incidental to missionary activities; 

2. Carrying samples only for display or for distribution without charge or other consideration; 

3. Owning or furnishing automobiles to sales representatives, provided that the vehicles are used exclusively for solicitation purposes; 

4. Passing inquiries and complaints on to home office; 

5. Incidental and minor advertising, i.e., a notice in a newspaper that a sales representative will be in town at a certain time; 

6. Missionary sales activities; 

7. Checking of customers' inventories (for re‑order, but not for other purposes); 

8. Maintaining a sample or display area for an aggregate of fourteen calendar days or less during the tax year, provided that no sales or other activities inconsistent with solicitation take place; 

9. Soliciting of sales by an in‑state resident representative of the taxpayer; provided the representative maintains no in‑state sales office or place of business; 

10. Training sales representatives or holding periodic meetings of sales representatives. 

(d) Activities That Are Not Solicitation. The following are examples of activities that fall outside of the scope of "solicitation" and are not protected by P.L. 86‑272 unless they are de minimis within the meaning of Wisconsin Dept. of Revenue v. William Wrigley, Jr., Co., 112 S. Ct. 2447 (1992). 

1. Making repairs or providing maintenance; 

2. Collecting delinquent accounts; 

3. Investigating creditworthiness; 

4. Installation or supervision of installation; 

5. Conducting training courses, seminars or lectures; 

6. Providing engineering functions; 

7. Handling customer complaints (other than by referral to home office); 

8. Approving or accepting orders; 

9. Repossessing property; 

10. Securing deposits on sales; 

11. Picking up or replacing damaged or returned property, including stale or unsalable inventory; 

12. Hiring, training, or supervising personnel (other than the training of sales representatives); 

13. Providing shipping information and coordinating deliveries; 

14. Carrying samples for sale, exchange or distribution in any manner for consideration or other value; 

15. Holding meetings of directors, officers, or employees; 

16. Supervising the operations of a franchisee or similar party; 

17. Monitoring, inspecting, or approving work performed by an independent contractor under a warranty or similar contractual arrangement; 

18. Maintaining sample or display area at one location in excess of fourteen calendar days during the tax year; 

19. Owning, leasing, maintaining or otherwise using any of the following facilities or property in‑state: 

a. Repair shop; 

b. Parts department; 

c. Purchasing office; 

d. Employment office; 

e. Warehouse; 

f. Stock of goods (but see 830 CMR 63.39.1(6)(c) regarding property stored in a public warehouse); 

g. Mobile stores, i.e., trucks with driver salespersons; 

h. Real property or fixtures of any kind; 

20. Consigning tangible personal property to any person, including an independent contractor; 

21. Maintaining, by either an in‑state or an out‑of‑state resident representative, an office or place of business; 

22. Qualifying to do business in Massachusetts; 

23. Owning an interest in any partnership, grantor trust, or other pass‑through entity whose activities, if conducted directly by a foreign corporation, would give Massachusetts jurisdiction over the foreign corporation under the provisions of 830 CMR 63.39.1(4), above, unless the activities of the pass‑through entity are limited to solicitation protected by P.L. 86‑272. 

(e) Rules of Construction. Whether the activities of a foreign corporation fall within the scope of "solicitation" within the meaning of P.L. 86‑272 is a factual determination. The examples of activities provided in 830 CMR 63.39.1(5)(c) and (d), respectively, are intended as guidelines. They are not exhaustive and will not precisely describe the activities of many foreign corporations. In applying the guidelines to the particular circumstances and activities of individual foreign corporations, the Commissioner will employ the following rules of construction: 

1. The term "solicitation" includes only actual requests for purchases and activities that are entirely ancillary to requests for purchases. An activity is entirely ancillary to the requesting of purchases only if it serves no independent business purpose apart from its connection to the soliciting of orders. 

2. Activities conducted by a foreign corporation with respect to a particular order generally do not constitute "solicitation" if they occur after the order has been placed. 

3. The effect of the activities listed in 830 CMR 63.39.1(5)(d) is cumulative. When determining whether a taxpayer's activities in excess of solicitation may be de minimis, all of these activities must be considered as a whole. 

4. If the Commissioner believes that a taxpayer engages in any activity listed in 830 CMR 63.39.1(5)(d), in Massachusetts, the Commissioner will require the taxpayer to carry the burden of substantiating any claim that its activities were de minimis. Documentary evidence will be given substantial weight in establishing the nature and extent of the taxpayer's activities. Affidavits or other evidence not contemporaneous with the events in question will be given little weight. 

(6) Other Exceptions

(a) General. A foreign corporation is not subject to the excise under M.G.L. c. 63, § 39, if its contacts with Massachusetts are limited exclusively to one or more of the activities listed in subsections (b)‑ (e) below. The activities listed below will not create jurisdiction even if they also fall within the scope of activities that would otherwise create jurisdiction under 830 CMR 63.39.1(4). For purposes of applying this subsection, the qualification to do business in Massachusetts under M.G.L. c. 181 is considered a contact with the Commonwealth that is independent of any other contacts that the foreign corporation may have with Massachusetts or activities that the foreign corporation may conduct in Massachusetts. 

(b) Federal Limitations (Other than P.L. 86‑272). A foreign corporation's activities will not subject it to the jurisdiction of Massachusetts under M.G.L. c. 63, § 39, if the constitution or laws of the United States preclude the exercise of jurisdiction. For discussion of activities currently protected from the exercise of state tax jurisdiction by P.L. 86‑272, see 830 CMR 63.39.1(5). 

(c) Property in Transit or Public Warehouse. A foreign corporation is not subject to the corporate excise under M.G.L. c. 63, § 39, because of its ownership of tangible personal property in actual transit through Massachusetts in the possession and control of a common or contract carrier (provided, however, that this provision shall not preclude the exercise of jurisdiction over foreign carriers whose vehicles enter Massachusetts) or because of its ownership of tangible personal property stored in a licensed public warehouse in Massachusetts. The exemption from taxation provided by M.G.L. c. 63, § 39, for the ownership of goods stored in a licensed public warehouse will not be lost because of the shipment of those goods by common or contract carriers from the public warehouse to locations either within or outside of Massachusetts (provided, however, that the exemption does not extent to foreign carriers whose vehicles enter Massachusetts). 

(d) Ownership of Shares. A foreign corporation is not subject to the corporate excise under M.G.L. c. 63, § 39, because of its mere ownership of shares of a corporation that does business in Massachusetts. 

(e) Maintenance of Accounts. A foreign corporation is not subject to the corporate excise under M.G.L. c. 63, § 39, because of its depositing of funds or maintenance of securities brokerage accounts with financial institutions, unrelated to the foreign corporation, that do business in Massachusetts. 

(7) Independent Contractors. For the purposes of determining whether a foreign corporation is subject to the excise under M.G.L. c. 63, § 39, the activities of employees, agents, or representatives, however designated, of the foreign corporation will be imputed to the corporation. An agent or representative may be an individual, corporation, partnership, or other entity. Activities of an independent contractor will not be imputed to the corporation. For purposes of 830 CMR 63.39.1(7), a person is an independent contractor only if all of the following conditions are met. 

(a) The person is not an employee of the foreign corporation. 

(b) The person is not subject, in the performance of activities on behalf of the foreign corporation, to the supervision or control (whether or not exercised) of the foreign corporation or any of that corporation's representatives. Whether a purported independent contractor is subject to the supervision or control of a foreign corporation or any of its representatives within the meaning of this subsection is a question of fact. 

(c) The person holds himself out to the public as an independent contractor in the regular course of its business. 

(d) The person must regularly act on behalf of at least one bona fide principal apart from the foreign corporation. Partners, corporate affiliates, or other closely related parties are not separate principals for purposes of this subsection. 

(e) The person may not approve orders on behalf of the foreign corporation or otherwise execute contracts on behalf of the foreign corporation, provided that: 

1. to the extent permitted by P.L. 86‑272, a person may sell or solicit orders for the sale of tangible personal property on behalf of a foreign corporation without losing the status of an independent contractor; and 

2. a financial institution that holds itself out to the public as an investment advisor, providing investment advice and/or management services, including portfolio accounting or bookkeeping services, custodial services, and related financial services to unrelated third parties shall not lose the status of an independent contractor by virtue of any authority that it may have to execute contracts related to the purchase, sale, or management of securities on behalf of those third parties. 

(8) Corporate Partners

(a) General Rule‑‑Partnership Activities Attributed to Partners. Except as provided by 830 CMR 63.39.1(8)(b)‑(d), below, a foreign corporation uses its capital in Massachusetts, does business in Massachusetts, and is subject to the excise under M.G.L. c. 63, § 39, if the corporation is a general or limited partner in a partnership whose activities, if conducted directly by a foreign corporation, would subject that corporation to the corporate excise under the provisions of M.G.L. c. 63, § 39. In the case of a tiered partnership, as defined in 830 CMR 63.39.1(8)(b)3, the activities of the partnership(s) occupying the lower tier(s) of a tiered partnership arrangement are imputed, proportionally, to all partners holding interests in partnership(s) occupying higher tier(s). 

(b) Exception for Certain Partnerships Dealing in Securities. A foreign corporation is not subject to the excise under M.G.L. c. 63, § 39, by reason of its status as a limited partner in a partnership that is engaged exclusively in buying, selling, dealing in, or holding securities on its own behalf, and not as a broker, provided that the foreign corporation is not otherwise subject to the excise under M.G.L. c. 63, § 39. See generally M.G.L. c. 62, § 17. 

1. In general, the exception in 830 CMR 63.39.1(8)(b) does not extend to an upper tier partnership in a tiered partnership arrangement, merely by virtue of the tiered structure. However, an upper tier partnership that is engaged exclusively in buying, selling, dealing in, or holding securities (apart from any limited partnership interests) in its own behalf, and not as a broker, may include among the securities in its portfolio, limited partnership interests in unrelated partnerships that conduct business activity in Massachusetts, without subjecting its corporate limited partners to the excise under M.G.L. c. 63, § 39. 
2. If an upper tier partnership in a tiered partnership arrangement is a limited partner of a lower tier partnership that is engaged exclusively in buying, selling, dealing in, or holding securities on its own behalf, and not as a broker, the activities of the lower tier partnership will not, in themselves, subject corporate partners of the upper tier partnership to the excise under M.G.L. c. 63, § 39. 
3. A tiered partnership arrangement is one in which some or all of the interests in one partnership (lower tier partnership) are held by a second partnership (upper tier partnership). A tiered partnership arrangement may have two or more tiers.
(c) Exception for Publicly Traded Partnerships. A foreign corporation that holds a limited partnership interest in a publicly traded partnership, as defined in Code § 7704, that conducts business activity in Massachusetts, is not subject to the excise under M.G.L. c. 63, § 39, unless the activities of that foreign corporation otherwise establish nexus with Massachusetts. 
(d) De Minimis Exception. Under circumstances specified in 830 CMR 63.39.1(8)(d)1.‑2., below, the Commissioner ordinarily will treat the holding of a limited partnership interest by a foreign corporation as a de minimis connection with Massachusetts and will not seek to impose the excise under M.G.L. c. 63, § 39, on that corporate limited partner, despite the conduct of business activities by the partnership in Massachusetts. This de minimis rule applies only to foreign corporations that, apart from their limited partnership holdings, are not subject to the excise under M.G.L. c. 63, § 39. The de minimis rule does not apply to any limited partner that is subject to tax under chapter 62 of the General Laws or to any general partner. The application of the de minimis rule is subject to the ownership attribution principles and other conditions stated below at 830 CMR 63.39.1(8)(d)3.‑4. 

1. The Commissioner ordinarily will treat a limited partnership interest of a foreign corporation as a de minimis connection with Massachusetts if the foreign corporation owns less than a five percent interest in the partnership and if neither the Massachusetts property of the partnership, nor its Massachusetts payroll, nor its Massachusetts sales, when multiplied by the foreign corporation's interest in the partnership, exceeds $10,000. The Massachusetts property, payroll, and sales of the partnership shall be calculated under the rules provided in M.G.L. c. 63, § 38. The interest of a limited partner in a partnership shall be its distributive share of the partnership's income, gain, loss, or credit, (whichever may be greatest) determined pursuant to Code § 704. 

2. Under extraordinary circumstances, the Commissioner may agree that a limited partnership holding of a foreign corporation is a de minimis connection with Massachusetts, even if the test stated in 830 CMR 63.39.1(8)(d)1. is not satisfied. In order to obtain the Commissioner's agreement to de minimis treatment under this subsection, 830 CMR 63.39.1(8)(d)2., a foreign corporation must establish to the Commissioner's satisfaction, during the course of an audit, by application for abatement, or by a determination under 830 CMR 63.39.1(9), that under the particular facts and circumstances applicable to the foreign corporation and the limited partnership, the connection between the foreign corporation and the Commonwealth is so inconsequential that the imposition of the corporate excise on the foreign corporation would constitute an unconstitutional extension of the tax jurisdiction of Massachusetts. 

3. For purposes of applying the de minimis rule under 830 CMR 63.39.1(8)(d), a corporate limited partner is treated as owning all interests in a partnership that it owns either directly or indirectly, including all interests of any party whose direct or indirect stock ownership would be attributed to the corporate limited partner under the provisions of section 318 of the Internal Revenue Code. Furthermore, if a corporation owns (or is treated as owning) limited partnership interests in two or more partnerships that conduct business activity in Massachusetts, other than publicly traded partnerships as defined by Code s. 7704, the Massachusetts property, payroll, and sales represented by those interests, as calculated above, must be aggregated when applying the de minimis rule. 

4. Any corporate limited partner that claims not to be subject to the excise under M.G.L. c. 63, § 39, because of the de minimis rule stated in this subsection bears the burden of establishing its claim to the Commissioner's satisfaction. In order to provide its corporate limited partners with the information necessary to make a de minimis calculation, any partnership that is required to file Massachusetts Form 3 and that has limited interests held by foreign corporations shall complete Part III of that Form (Income Apportionment) and shall provide a copy of the completed form to any partner that requests one. 

Example. The following example illustrates the provisions of 830 CMR 63.39.1(8)(d): 

Some Place Partners, L.P., (Partnership) is a limited partnership that owns an office building at One Some Place in Boston. The Partnership purchased the property for $5 million and receives $500,000 gross annual rent. The partnership has no payroll and no other property or sales in Massachusetts. Corporation X, a foreign corporation, is a limited partner with a one percent capital and income interest in the Partnership. Corporation X has no other contacts with Massachusetts. Corporation X is subject to excise under M.G.L. c. 63, § 39, and does not qualify for the de minimis exception of 830 CMR 63.39.1(8)(d) because the Massachusetts property attributable to Corporation X exceeds $10,000. Specifically: 0.01 x $5,000,000 = $50,000. 

(e) Effective Date. The provisions of this subsection, 830 CMR 63.39.1(8), shall apply to taxable years commencing on or after the effective date of this regulation, 830 CMR 63.39.1. 

(f) Presumption of Separate Accounting. If a foreign corporation is subject to the tax jurisdiction of Massachusetts under M.G.L. c. 63, § 39, only by virtue of its status as a limited partner of a partnership that conducts business in Massachusetts, and if the foreign corporation owns no more than fifty percent of the interests in the partnership, the Commissioner will presume that income received by the corporation from sources other than either the partnership or the disposition of its limited partnership interest is not derived from business activity carried on within the commonwealth within the meaning of M.G.L. c. 63, § 38. Unless this presumption is rebutted either by the Commissioner or by the taxpayer, the Commissioner will require the foreign corporation to account separately for its partnership income and to apportion this separate income to Massachusetts in accordance with the rules of M.G.L. c. 63, §§ 38 or 42, using only the partnership's property, payroll, and sales to determine an apportionment percentage. The separate accounting shall apply both to the determination of income subject to apportionment under M.G.L. c. 63, § 38 or 42, and to the determination of the property measure of excise under M.G.L. c. 63, § 39(a)(1). 

Either the Commissioner or a taxpayer may rebut the presumption of separate accounting by demonstrating that the corporate limited partner and the partnership are engaged in a unitary business. If a corporate limited partner has engaged in a unitary business with the partnership in one or more taxable years, the corporation may not separately account in any taxable year for the income it derives from the partnership. Instead, the foreign corporation shall apportion to Massachusetts all income derived from business activity carried on within the commonwealth, including income derived from its partnership interest, in accordance with the rules of M.G.L. c. 63, §§ 38 or 42 using the corporation's own property, payroll, and sales plus its pro rata portion of the partnership's property, payroll, and sales to determine an apportionment percentage. 

If a foreign corporate limited partner engages in a unitary business with its partnership, the activities of the partnership shall be deemed to be activities of the limited partner for purposes of determining whether the taxation of the limited partner is precluded by P.L. 86‑272. 

(9) Nexus Determinations

(a) Applications. A foreign corporation may apply to the Commissioner for a determination of whether the corporation is subject to tax under M.G.L. c. 63, § 39, in a particular taxable year. A request for a nexus determination for a taxable year must be mailed to the Commissioner, at the address stated below, on or before the last day of the first quarter of taxpayer's taxable year. The request should generally conform to the requirements of a request for a letter ruling under 830 CMR 62C.3.2, and, in addition, the corporation must complete a nexus questionnaire provided by the Commissioner. The Commissioner may choose to treat any request for a nexus determination as a letter ruling application and may issue and publish such a ruling as provided by 830 CMR 62C.3.2, but nexus determinations generally will not be published. 

Foreign corporations that wish to request a nexus determination should write to: 

Massachusetts Department of Revenue
Rulings and Regulations Bureau, Room 703
100 Cambridge Street
Boston, MA 02204 

(b) When Nexus Determinations Will Be Issued. The Commissioner ordinarily will make a nexus determination prospectively, regarding business activity that a taxpayer has not yet undertaken in Massachusetts, after receiving a proper request, but the Commissioner may decline to make a determination in any case, for any reason. The Commissioner ordinarily will not issue a determination to any taxpayer in either of the following circumstances. 

(1) The Commissioner ordinarily will not issue a determination if, at the time the application is made, the Department is investigating the taxpayer's nexus with Massachusetts in connection with an audit or other examination. 

(2) The Commissioner ordinarily will not issue a determination if the taxpayer is currently filing corporate excise returns in Massachusetts. 

(c) Effect of Determination. A nexus determination extends only to the facts stated in the corporation's request. The nexus determination is not an acknowledgment of the accuracy or completeness of this factual statement. The Commissioner reserves the right to investigate the accuracy and completeness of the corporation's factual statement, either before or after a determination is made. If, after a nexus determination is made, the Commissioner determines that a foreign corporation has engaged in any activities not fully disclosed in its request for a determination that constitute doing business in Massachusetts, the Commissioner may assess excise, including interest and penalties, for any taxable year, including the year for which the determination is issued, within the applicable statute of limitations. (Generally, no statute of limitations applies to periods for which a taxpayer has failed to file a return.) 

A valid nexus determination will be binding on the Commissioner with respect to the taxable year for which it is made. A determination that a foreign corporation does not have nexus with Massachusetts will be binding with respect to subsequent taxable years only if there is no change in the controlling law and only if the taxpayer files an affidavit, signed by an officer authorized to sign tax returns, stating that the taxpayer's Massachusetts activities have not changed from those described in its request for a determination. The affidavit must be filed annually by mailing on or before the last day of the first quarter of the taxpayer's taxable year to the address stated in 830 CMR 63.39.1(9)(a). A determination is automatically revoked if the affidavit is not timely filed. Notwithstanding any affidavit, however, the Commissioner may revoke or reverse a nexus determination prospectively at any time by giving written notice to the taxpayer. 

(10) Examples. The following examples illustrate the provisions of 830 CMR 63.39.1. Except as stated in Example 7, below, the examples assume that the foreign corporations involved have not qualified to do business in Massachusetts. 

Example 1(a). Abundant Acres, Inc., is a foreign corporation that operates as a real estate broker. Abundant Acres has no office or employees in Massachusetts, but it has registered with the Massachusetts Board of Registry for Real Estate Brokers and Salesmen, and it brokers the sale of Massachusetts real estate. Abundant Acres is subject to the excise under M.G.L. c. 63, § 39, because it is doing business in Massachusetts within the meaning of 830 CMR 63.39.1(4) and because its activities do not constitute solicitation of orders for the sale of tangible personal property. See 830 CMR 63.39.1(5). 

Example 1(b). Alluvial Acres, Inc. (Alluvial) is a foreign corporation that is a registered Realtor/Broker in another state. It is not registered as a real estate broker in Massachusetts, it maintains no offices or agents in Massachusetts, and it owns or leases no real property in Massachusetts. 

For a fee, Alluvial will provide space in its computer database to real estate sellers to list their properties. Each property is included in listings compiled for distribution to potential buyers interested in property in the seller's area. Alluvial conducts business by mail or telephone. It solicits property listings through advertisements in national and regional publications. Alluvial does not act as a broker with respect to the sale of Massachusetts real estate. It plays no part in negotiations or settlements, receives no commissions, and has no contact with buyers and sellers other than collecting and distributing information. 

Alluvial is not doing business or exercising its charter in Massachusetts. It does not own or use any property in the Commonwealth. It is not subject to the excise under M.G.L. c. 63, § 39. 

Example 2. Barefoot Builders Inc., (Barefoot) is a foreign corporation engaged in the leasing of construction vehicles. Barefoot leases vehicles to individuals and businesses in Massachusetts. It has no offices or employees in Massachusetts. Nevertheless, Barefoot is subject to the corporate excise under M.G.L. c. 63, § 39, because it owns property located in Massachusetts and it does not use that property for "solicitation" within the meaning of 830 CMR 63.39.1(5). 

Example 3. Convoluted Computers, Inc. (Convoluted) is a foreign corporation that manufactures mainframe computers and peripherals. Convoluted has no offices in Massachusetts. It employs sales representatives who visit Massachusetts periodically to solicit orders. These representatives give presentations explaining the capacities and advantages of Convoluted's computers. The representatives also provide general price information to prospective customers, but they have no authority to accept orders. Final contract negotiations and execution of contracts occur at Convoluted's home office outside of the Commonwealth. Convoluted ships its products to Massachusetts by common carrier. 

In addition to its sales representatives, Convoluted also employs technicians who install and service the machines purchased by Massachusetts customers. The technicians are based at Convoluted's home office and travel to the customer's facilities only for as long as the installation requires. 

Because Convoluted employs workers in the Commonwealth, its activities fall within the scope of M.G.L. c. 63, § 39, unless they are protected by P.L. 86‑272. Convoluted's sales representatives engage in protected solicitation activities. However, Convoluted's technicians are providing services, not soliciting sales of tangible property, so their activities are not protected. See 830 CMR 63.39.1(5)(b) and (5)(e). Since foreign corporations that engage in both protected and unprotected activities are subject to the Massachusetts corporate excise, Convoluted must file a return and pay the associated excise. 

Example 4. Diffuse Deliveries, Inc. (Diffuse) is a foreign corporation engaged in interstate trucking. Diffuse's trucks frequently transport goods over the roads of Massachusetts, and may or may not pick up or deliver goods in the Commonwealth. Diffuse is subject to the Massachusetts corporate excise because it uses corporate property (trucks) and provides a service (transportation) in Massachusetts and because its activities are not solicitation of orders for the sale of tangible personal property. 

Example 5. Eager Educators, Inc., (Eager) is a foreign corporation engaged in the business of conducting and marketing personal development training seminars. Eager either conducts seminars itself, using its own employees, or trains employees of client corporations to run seminars for those corporations. In either circumstance, Eager provides written course materials for each seminar participant. Eager has no offices in Massachusetts. Eager provides its customers with a combination of services (training or instruction) and tangible property (course materials). Eager will therefore be subject to the Massachusetts corporate excise if it: 

(a) conducts seminars in Massachusetts, using its own employees; 

(b) contracts to allow one or more clients to conduct seminars in Massachusetts, and 

1. the contract is executed in Massachusetts; or 

2. Eager's employees come to Massachusetts to train, supervise, or advise client instructors, or to deliver course materials; or 

(c) sends employees to trade shows or conventions in the Commonwealth or otherwise solicits sales of services in Massachusetts through sales personnel located in the Commonwealth. 

Eager will not be doing business in Massachusetts and will not be subject to excise under M.G.L. c. 63, § 39, if its activities in Massachusetts are limited to one or both of the following: 

(a) solicitation of business by telephone from outside of the Commonwealth; or 

(b) advertising in trade journals distributed in Massachusetts. 

Example 6. Flirtatious Flavors, Inc. (Flirtatious) is a foreign corporation engaged in the manufacture and sale of candies. Flirtatious has no office or retail outlets in Massachusetts. However, it employs three full‑time sales representatives who live in Massachusetts and who solicit sales in Massachusetts and other New England states. The sales representatives work out of their homes but do not store inventory there, and do not publicize their home addresses as business addresses of Flirtatious. 

Flirtatious provides each of its sales representatives with a company‑owned car. The cars are registered and principally used in Massachusetts. They are garaged at the sales representatives' homes, and are used by the representatives to visit customers. 

Flirtatious employs workers and maintains a limited quantity of corporate property (company cars) in Massachusetts. However, its activities, including the activities in which its property is used, are limited to the solicitation of orders for the sale of tangible personal property. See 830 CMR 63.39.1(5). Therefore, it is not subject to the Massachusetts corporate excise. 

Example 7. Geronimo Gents, Inc. (Geronimo) is a foreign corporation engaged in the retail sale of designer parachutes and fashionable gentlemen's parachuting attire. In 1988, Geronimo qualified to do business in Massachusetts and opened stores in Fall River and Newton Upper Falls. After high initial sales, Geronimo's profits plunged, and Geronimo abandoned its local operations in 1989. However, despite ceasing Massachusetts business activities, Geronimo remained qualified to do business in the Commonwealth until 1991. 

The corporate excise under M.G.L. c. 63, § 39, is imposed not only when a corporation does business in Massachusetts, but also when it is qualified to do business in the Commonwealth. See 830 CMR 63.39.1(4)(a). The qualification to do business is not "solicitation." See 830 CMR 63.39.1(5)(d)22. Geronimo is subject to the corporate excise through its 1991 taxable year. 

Example 8. Humble Homes is a foreign corporation that sells furniture. The company regularly delivers furniture that it has sold to locations in Massachusetts using its own delivery trucks. The delivery trucks are corporate property that the company owns or uses in Massachusetts in a corporate capacity within the meaning of 830 CMR 63.39.1(4)(d). The delivery of goods does not constitute "solicitation" of orders. Humble Homes is therefore subject to the excise under M.G.L. c. 63, § 39. 

Example 9. Invisible Inc. is a foreign corporation that holds intangible assets. Invisible has no employees, tangible property, or sales. However, the majority of its corporate functions are performed in Massachusetts. These corporate functions include maintaining books and records, holding directors' meetings, and making day‑to‑day business decisions. The corporate functions are performed in Massachusetts by Invisible's directors or by employees of an affiliate. Invisible is subject to the excise under M.G.L. c. 63, § 39. 

Example 10. Just Javelins, Inc. (Javelins) is a foreign corporation that manufactures sports equipment outside of Massachusetts. Javelins opens a securities account with a Massachusetts financial institution, Kindred, Inc., and retains Kindred as a financial advisor. Under an agreement signed by the two companies, Kindred has the authority to invest Javelins' assets in various securities. Officers of Javelins visit Kindred's office in Massachusetts two or three times per year, for one or two days per visit, to review the performance of Javelins' securities portfolio and to discuss future investment plans. Javelins has no other contacts with Massachusetts. Javelins is not doing business in Massachusetts and is not subject to tax under M.G.L. c. 63, § 39. 

 

REGULATORY HISTORY
Date of Promulgation: 1/1/93